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Rich Tehrani

[February 4, 2004]

The Future Of IP Telephony: A Panel Discussion At INTERNET TELEPHONY Conference & EXPO



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Panelist Chuck Rutledge of Quintum Technologies answers our questions:

Q. IP Telephony's market share is increasing. What are your predictions for continued growth of IP Telephony in the Enterprise space? What about in the service provider space?

A. The growth in both the enterprise and the service provider space has just begun.  The industry to date has been largely driven by arbitrage opportunities and those early adopters validating the benefits of converging voice and data on a single network.  Now that these benefits have been proven and are better understood, we should experience mainstream market growth.

The IP PBX has proven to offer substantial benefits to the enterprise particularly in the SME market.  We will now see larger installations of IP based telephony systems with broad deployments across branch offices.  We will see companies not just deploying IP telephony as PBX replacements, but also expanding their existing voice networks based on VoIP while simultaneously phasing out the legacy PBX equipment. 

In the service provider market we are beginning to see the move from VoIP being used to support low cost calling card applications to mainstream telephony services.  As enterprises are deploying more IP telephony systems the service providers have the opportunity to add even greater value by positioning themselves to offer IP based services and provide off net VoIP connectivity.  Also, telephony markets around the world are deregulating, opening the markets for competition.  The next generation of telecom competitors will take be taking advantage of VoIP benefits in deploying their networks.  This capability is creating new opportunities for service providers including the following:

  1. The enterprise market is interested in simplifying their operations.  VoIP allows service providers to efficiently offer managed voice and data services and IP Centrex.  These services not only will save the company money, but will lower the cost of network management and provide valuable features such as message management, on-line provisioning with virtual phone numbers, support of remote workers and follow me services.

  2.  Incumbent Telcos and the CATV companies see both opportunity and threat in convergence as they look to identify compelling offers to retain/ increase their customer base and revenue stream.  They are also threatened by the next generation service providers who are able to utilize VoIP technology to substantially reduce the barriers to offering voice based services.  All parties see the need to support a bundle of services over a converged infrastructure. None of the players can risk not being able to deliver a bundle of services or the innovative applications that VoIP based services will bring.

  3. Another market that is prime for VoIP is providing telephony services to those geographies in the world where the current teledenisty is low and where deregulation is occurring.   The cost of deploying voice services with VoIP technology is an order of magnitude less than utilizing circuit switch technology.  Service deployment is also not constrained by the availability of traditional telephony local loop.  Utilizing VoIP, a company can provision services anywhere an IP network exists or can be easily deployed via technologies like broadband wireless.

Finally, expect the appearance of data and web applications that have integrated IP telephony to create richer more productive applications.  We are seeing telephony become a sophisticated data application, and as the infrastructure to support this application develops we will see integration of voice and data at the application level.  Phone calls will not be the objective, but rather enhancing applications with two way voice and video will be where the benefits are realized.

Q. How do IP Telephony systems compare to legacy systems on a cost basis? Does it make financial sense to move from legacy systems to IP telephony? And what of the "soft" cost savings (productivity, ease of use)...? What impact does that have on the decision to adopt new technology?

A. IP Telephony systems not only offer the efficiencies of a single network for both voice and data, but they actually cost less � and in some cases a lot less.  Today�s IP PBX systems are becoming more cost effective as the technology matures.  The call processing intelligence is moving toward software that will be run on a standard server or softswitch, and interoperable devices (VoIP gateways, IP phones, SBCs) are becoming competitively available from a variety of vendors.  We will begin to see open source software solutions as well, offering both low cost and opportunities for innovation.  Service provides can deploy a VoIP POP for a fraction of the cost of a Telco central office as is evidenced from the proliferation of next generation service providers.

It is now well understood that IP telephony systems have the advantage of being managed as part of the data network infrastructure.  The need for telecom specific personnel is substantially reduced or eliminated, providing a more flexible IT workforce.  A VoIP network can centralize much of its intelligence so the management of the network can also be centralized � there is no longer a need to have diverse PBXs located around the country and around the world.   A service provider can centralize the network operations and billing and remotely manage POPs anywhere.

Inevitably, the key driver for IP Telephony will be productivity enhancing applications such as the ability to support remote workers, integration of voice and data for call center support, on-line feature provisioning, etc.  The choice to deploy an IP Telephony system in a greenfield environment is pretty clear � the advantages of VoIP easily outweigh traditional circuit switched systems.  The more challenging question is what to do when there is an existing circuit switched system, yet there is a desire to take advantage of the benefits of IP telephony. 

One easy approach is to address expansion needs by utilizing IP Telephony.   An enterprise has a number of choices.  Many PBXs now have the ability to be upgraded to support IP telephony, offering the ability to migrate to VoIP while leveraging the existing PBX.  They can convert branch offices over to IP telephony as they swap out existing PBXs.  They can also deploy an IP telephony system next to the existing PBX integrating it into a new and expanding IP telephony network.

Service providers face the challenge of integrating their existing systems with the new VoIP systems.  This will be critical as many service providers will want to deploy a bundle of services to the end customer.  This will continue to be a challenge in the near future, but as the market continues to mature, we should expect to see vendors offering solutions for the integration of various operations and support systems with VoIP equipment.

Q.  What are some of the specific steps the industry needs to take in order to ensure continued growth and user adoption of IP Telephony? What are some potential pitfalls and how should they be avoided?

A. One of the most valuable aspects of IP telephony is its roots in open systems.  The industry needs to continue to push for resolution of standards and interoperability.  The computer industry has benefited tremendously from open architectures and the ability to integrate equipment and software from different vendors.   It will be through the continued adoption of standards that innovation and competition can advance the industry.  This will accelerate the creation of new applications and assure the applications are affordable and interoperable. 

The industry has moved productively forward in adopting new protocols such as SIP.  This has allowed interoperability between vendors with the creation of such things as VoIP WiFi hand sets and the integration of voice into IM.  As the market develops there will be the need to address such areas as QoS peering and security.  The industry will want to diligently pursue and adopt standards in these and other areas.

The area of regulation has been getting a lot of attention.  This will be an area that will create challenges for the industry, particularly as the popularity of VoIP services grows.  Obviously the industry will want to avoid as much regulation as possible.  Substantial regulation could slow down VoIP adoption as well as the development of applications.  There are public interest issues that will need to be addressed and will likely come under regulatory scrutiny, such as 911/E911 and CALEA.  These issues will inevitably not be avoided, so it would be better to address the issues and prepare for solutions for them.

Another potential area that could be a pitfall is security. As more of our voice communications becomes VoIP, the greater the concerns about security will become.  Just as security has become an issue on the internet with regards to attacks and fraud, security issues will become greater with IP Telephony.   Wide scale IP Telephony deployment will require that users feel that both their networks and their calls are secure.

Finally as the industry moves into the mainstream, there will be the need to effectively manage much larger scale networks than are deployed today.  Creating the network management and operations systems that will allow service providers to scale their networks very large will be required to achieve broad deployments of VoIP infrastructure.

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Rich Tehrani is TMC's president. He welcomes your comments. Participate in our forums.

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